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Bulls Score Election Rally on Wall Street

Mike Taylor

Stocks in New York closed with healthy gains Tuesday as traders sorted through some encouraging quarterly earnings reports and polls across the nation opened for the U.S. presidential election.

The Dow Jones Industrial Average gained 305.45 points, or 3.3%, to 9625.28, and the S&P 500 climbed 39.45 points, or 4.1%, to 1005.75. The Nasdaq tacked on 53.79 points, or 3.1%, to 1780.12.

"I wouldn't hang my hat on it," said Chris Johnson, CEO and chief investment strategist for Johnson Research, of today's rally in the major averages. He said that the markets have lately been extremely oversold and that recent upward price action has been on fairly low volume. "This is a step in the right direction, but it's certainly not the green light we've been looking for in terms of the longer-term opportunity."

Johnson said that the election has largely been priced into the market. "In the current economic environment I don't think you're going to see huge tax increases coming down the road," he said. He said he's watching for whether the Democrats win a filibuster-proof majority in the Senate, which would grant them substantial power to institute broad changes. "That's the thing where everybody's saying, 'look out,'" he said.

"In a year when you can feel like there's nothing but uncertainty ... at least [the election] is one thing that we'll know is over," said Bill Stone, chief investment strategist at PNC Wealth Management. He said he's more encouraged by the market's recent ability to "rally, or not crater, despite really bad economic news across the board," and he doesn't expect there to be much encouraging data in the fourth quarter.

A series of solid corporate earnings results were bolstering investor enthusiasm. Following Monday's close, credit-card company MasterCard (MA Quote) took a net loss on charges related to its settlement of a legal scuffle with Discover Financial Services (DFS Quote). Excluding the charge, however, MasterCard's earnings trumped the Street's forecasts. MasterCard jumped 18% to $170.26.

Meanwhile, energy company Anadarko Petroleum (APC Quote) reported that third-quarter profit climbed year over year and beat analyst estimates. The stock rose 6.2% to $35.18.

Farm products maker Archer Daniels Midland (ADM Quote) reported profit that more than doubled year over year, sending shares up 15% to $24.24.

Pharmacy operator Walgreen (WAG Quote) announced Tuesday that its October same-store sales climbed 2% year over year. Shares added 4% to $25.6.

Media firm Viacom (VIA Quote) wasn't so fortunate, as its earnings dropped 37% year over year. The stock nevertheless rallied 4.5% to $22.65.

In the technology arena, cell-phone maker Nokia (NOK Quote) announced that it will cut an estimated 450 jobs as it restructures its operations. Shares climbed 5.8% to $16.74.

A series of reports on the state of the financial sector revealed a mixed bag. Ahead of the trading day, The Wall Street Journal reported that the Treasury Department is mulling taking equity positions in financial companies beyond banks and insurers. According to the report in the Journal, General Electric's (GE Quote) GE Capital segment and CIT Group (CIT Quote) are among businesses that may become eligible.

GE rose 7.6% to $20.77, and CIT rocketed 36% to $6.15.

A Goldman Sachs (GS Quote) hedge fund lost $989 million since January, according to a report in the Financial Times. Goldman added 6.3% to $95.

Bloomberg also reported that JPMorgan Chase (JPM Quote) would close one of its global trading desks and cut jobs in anticipation of a recession. The stock edged up 3.5% to $42.17.

Elsewhere in the financials, Swiss bank UBS (UBS Quote) announced it swung to a profit for the third quarter. The profitable quarter follows four straight earnings periods marked by losses on writedowns tied to mortgage securities. UBS shares gained 7.5% to $17.39.

Credit markets were continuing to improve. Three-month dollar Libor, a measure of the rate banks charge one another for large loans, declined 15 basis points to 2.71%, its lowest level since Lehman Brothers declared bankruptcy. Overnight Libor fell one basis point to 0.38%.

Johnson said that the recent decline in Libor rates is a positive, but the rates have come down sharply from very high levels and it would be very difficult for them to go up from where they had been. "It's not a bad thing, it's an expected thing," he said of the easing in the credit markets.

Looking at the day's economic data, the Census Bureau's September factory orders numbers showed a decline of 2.5%, a narrower slide than 4.3% in August but worse than economists' forecast for a 0.8% decline..

In the realm of commodities, crude oil rose $6.62 to settle at $70.53 a barrel. Gold added $30.50 to close at $757.30 an ounce.

Longer-dated U.S. Treasury securities were rising in price. The 10-year was adding 1-14/32 to yield 3.74%, and the 30-year was gaining 1-31/32, yielding 4.21%. The dollar was rising vs. the yen but declining rapidly against the euro and pound.

Overseas, European exchanges, including the FTSE in London and the Dax in Frankfurt, were broadly trading higher. As for Asian stocks, Japan's Nikkei and Hong Kong's Hang Seng closed higher.

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